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Economic developments

Since April 2012, Australia's unemployment rate has steadily climbed from 4.9 percent to its current high of 6.3 percent (the highest it has been in 12 years).

2015 is likely to see further increases in unemployment as the resources sector slows down off the back of declining commodities prices. Since February 2013, global iron ore prices have fallen from approximately USD 150 per ton to USD 73 per ton. Oil prices have similarly dropped from a high of USD 108 per barrel (in June 2014) to recent lows of USD 77 per barrel. Declining commodities prices can be expected to affect the profitability of many Australian mining operations and will most certainly stagnate development in new mining ventures.

Additionally, large Australian employers outside of the resources sector are feeling the pinch and laying off large numbers of staff, both in the private and public sectors. For example, according to the Community and Public Sector Union's Nadine Flood, the Australian Government has slashed more than 8,000 public service jobs in 2014 in an attempt to reduce budget deficits partly caused by falling tax revenue from mining profits.

Worsening industrial relations in the mining industry

The resources slowdown is not just causing an increase in the unemployment rate; it is also promoting fractured labour relations at some of Australia's largest resources projects. The Maritime Union of Australia (MUA) has been involved in significant disputes with DP World at Fremantle (near Perth), Teekay Shipping at Port Hedland and Chevron and its contractor Mermaid Marine at the Gorgon project in Western Australia.

The Australian Mines and Metals Association has accused the MUA of "waging some sort of misguided industrial war against the resources industry", and the Royal Commission into Trade Union Governance and Corruption heard that $1 million was paid to a MUA training fund to resolve a labour dispute over foreign crewing off Western Australia. Major employers involved in Western Australia are publicly lobbying the Australian Government to make its industrial policies and regulations competitive globally. Labour unions and employers alike know that a crunch time is approaching. We anticipate a worsening of labour relations as each side of the negotiating table seeks to protect the interests of its constituency.

Thanks to associates Michael Whitbread and Viv Jones and Summer Clerk William Maher for their assistance in the preparation of this Update.

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